Proposed Changes to Medicare in the “Path to Prosperity”: Overview and Key Questions

This brief examines key Medicare provisions included in “The Path to Prosperity: Restoring America’s Promise,” a long-term budget proposal released by House Budget Chairman Paul Ryan on April 5, 2011, which outlines a strategy for reducing federal spending and reducing the national debt over time. The Medicare provisions are among the many significant changes to programs affecting the elderly and disabled in the “Path to Prosperity” proposal.

The central Medicare proposal would transform the program from one that helps pay for a defined set of benefits to one that provides “premium support” payments to private health insurers on behalf of Medicare enrollees, beginning in 2022. Under the plan, the government would contribute a pre-determined amount toward the cost of private health insurance, with beneficiaries responsible for costs above that amount. The annual increase in the government contribution would be limited to the consumer price index, a measure of general inflation.

Under the proposal, a typical 65-year-old retiring in 2022 would be expected to devote nearly half their monthly Social Security checks toward health care costs, more than double what they would spend under current Medicare law, according to the analysis.

The brief also describes other Medicare provisions included in the proposal, including gradually raising Medicare’s age of eligibility from 65 to 67, and repealing provisions of the 2010 law that would have closed the Medicare drug benefit’s coverage gap, or “doughnut hole,” and created an Independent Payment Advisory Board (IPAB).